Correlation Between Netflix and ICOS

Can any of the company-specific risk be diversified away by investing in both Netflix and ICOS at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Netflix and ICOS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Netflix and ICOS, you can compare the effects of market volatilities on Netflix and ICOS and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Netflix with a short position of ICOS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and ICOS.

Diversification Opportunities for Netflix and ICOS

0.57

Correlation Coefficient

Netflix  ICOS

Very weak diversification

The 3 months correlation between Netflix and ICOS is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and ICOS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICOS and Netflix is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Netflix are associated (or correlated) with ICOS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICOS has no effect on the direction of Netflix i.e., Netflix and ICOS go up and down completely randomly.

Pair Corralation between Netflix and ICOS

If you would invest  75,551  in Netflix on September 4, 2024 and sell it today you would earn a total of  14,223  from holding Netflix or generate 18.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	4.76%
Values	Daily Returns

Netflix  vs.  ICOS

Netflix

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Netflix showed solid returns over the last few months and may actually be approaching a breakup point.

ICOS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ICOS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, ICOS is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Netflix and ICOS

The main advantage of trading using opposite Netflix and ICOS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, ICOS can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ICOS will offset losses from the drop in ICOS's long position.

The idea behind Netflix and ICOS pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..